Chapter 3 Flashcards
Process Costing
Producing one unit is indistinguishable from other units of product.
Job-order Costing
Many different products are produced each period and maintaining cost records for each job.
What is an Allocation Base?
is used to assign manufacturing overhead to individual jobs
Why Use an Allocation Base?
It is difficult to trace overhead costs to particular jobs
What is POHR?
Predetermined Overhead Rate
How to calculate POHR?
Estimated total manufacturing overhead cost for the coming period / Estimated total units in the allocation base for the coming period
Why a POHR?
Using a predetermined rate makes it possible to estimate total job costs sooner.
Overhead Applied Formula
Overhead Applied = POHR * Actual Activity
Interpreting the Average Unit Cost
not be interpreted as the costs that would actually be incurred if an additional unit were produced.
How are Non-manufacturing costs assigned?
not assigned to individual jobs; rather they are expensed in the period incurred.
What is underapplied overhead?
exists when the amount of overhead applied to jobs during the period using the POHR is less than the total amount of overhead incurred
What is over-applied overhead?
Opposite of under applied overhead
“Overhead Applied During the Period” formula?
POHR times Actual Direct Labour Hours
Pros/Cons of Predetermined Overhead Rates
May be more accurate because it reflects differences across departments.
